Differences in Tenancy Types and the Six Geese a Laying
Using the correct contracts when letting out a property is extremely important.
There are so many variants of generic contracts which range from the Assured Shorthand Tenancy (AST) to a variety of Common Law Agreements and Licences which are used for grazing purposes, boat hire, garages, parking, sheds and much more. Understanding the differences between contracts will help understand how to navigate the tenancy correctly.
The AST is the most widely used tenancy in England. Governed by a range of legislation which includes but is not limited to the Housing Act 1988 (1996), the Deregulation Act 2015, the Landlord & Tenant Act 1987, the Housing Act 2004 and the Tenant Fees Act 2019. The tenancy agreement works in favour of both landlord & tenant ensuring that there is a fair balance for all parties. The security deposit, if there is one, must be protected within a set time-frame, the duration of the tenancy must be a minimum of six months and a maximum of three years, notices served are governed by housing law and must adhere to certain elements of law, this tenancy type is for individuals and not companies (tenants), and therefore, does not apply to commercial properties only residential.
Common-Law agreements - High Rent, Company Let and Licences - whilst still contracts, work differently. No section 21 or section 8 notices used here, instead the key documents are the Notice to Quit and the forfeiture letter/notice. The elements of the contract are similar but the rental amount for the high rent is £100,000 or more per year, if the company in question is Limited, PLC or LLP, a Company Let agreement would be used. Security deposits do not need to be protected, the tenant fee ban (applies to licences) and the deregulation act do not apply.
Licences are the most fluid type of contract, agreements that are drafted for use by Landlords licences for farms, playing fields, car parks, garages rooms where the landlord is resident in the property and allotments. For example, if a landlord wishes to rent land where six geese and a donkey will graze, then the licence will be ideal. A licence gives someone only the permission to occupy the premises. The occupant only has the consent from the landlord to occupy the premises for a period of time, and the occupier has no legal interest in the land or property. A licence is suitable for short term arrangements and “non-exclusive use of land”, this means that the occupant does not have “Exclusive Possession” and there is no “security of tenure”. Providing “reasonable notice” is given, the landlord of accommodation let on licence has the right to enter the occupants home, e.g. for cleaning.
Another point to bear in mind is what the mortgage lender stipulates about the tenancy type to be used by the landlord. The lenders do not like risk, therefore may put in place certain restrictions within the mortgage offer and mortgage agreement.